We used to call it the Death Star. That was the name for Amazon (AMZN) , a moniker so deserving that we just had to hope it wasn't trained on any of our investments.
I still love Amazon. I think that Amazon Prime represents a great value, Amazon Web Services is the dominant cloud business and Amazon advertising is incredibly strong.
But the Death Star, a name that the legendary investor John Malone used in an interview with my colleague David Faber?
Not after this quarter. This was the quarter that will go down as the one where brick and mortar struck back and the Death Star is no more.
Oh it started pretty subtly when we realized that CVS (CVS) , so often kicked to the curb off of Amazon rumors of email pharmacies, wasn't going anywhere. We used to think of CVS as a frumpy old drug store beaten up by Amazon at every turn. Now? I don't know where you got your shots - and I hope you have - but if you went to your CVS you might have seen a minute clinic within your store. Just as CVS has improved we have learned something about human behavior: people don't like their pills delivered by mail. It's just not something that's preferred. Amazon has been trying for ages to upend the back end of CVS and it has failed. Now the needle has given CVS a new lease on life and we have discovered there is a lot more than we thought.
Then there's Target (TGT) . When they bought Shipt, the same day service, we knew they meant business. But I think they have by far the best buy online pick up options to the point, as CEO Brian Cornell said on his call, "We added numbered parking lots so that we can find your black SUV among the 12 black SUVs." They've got a Target app that allows guests to end the "promo FOMO", their term for fear of missing out on the best deals currently offered. I like the fact that the Target I know in Brooklyn has a third floor largely dedicated to local uniforms from schools. You see that on Amazon let me know.
I am seeing Walmart (WMT) some major moves including today's GoLocal which will help more businesses with delivery besides its own. Arguably this is a rival to DoorDash (DASH) but I would think of it as more of a good will mission to those businesses that are worried about being beaten by Amazon even as it will be white-labeled. Not a needle-mover, sorry, and I say that even as it is owned by my charitable trust which you can follow along at Action Alerts PLUS.
I think that Walmart's plus offering where you get unlimited free delivery has some traction. I think it is time to get more. Recently Walmart offered a private label insulin that represents a 58% to 75% off cash price of branded insulin. We have seen how well Walmart handled the vaccine rollout. Why should it not offer Walmart+ people the best prices available for all pharma products the way GoodRx (GDRX) does. The latter does it algorithmically. You tell me that the 200 million people of Walmart wouldn't be an amazing buying group and Doug McMillon, the CEO could offer the lowest prices for all drugs IF you are a member of Walmart +. What a win that would be.
Now, let's talk about the most miraculous turn the tables story in retail: let's talk about what Corie Barry did at Best Buy (BBY) today. The stock of Best Buy was up 11% not just because Best Buy offers the best customer service on electric goods, phones, appliances and computers. It was up big because it is introducing one of the most amazing services imaginable: an at home tech service that's as good as your tech support at the office. Maybe better. Now as recently as April, when we all thought this country would go all in for vaccination, the idea that we would need home IT support would seem ludicrous, as ludicrous as Abbott (ABT) making all of those millions of Binax tests that seem so unnecessary with the country done and the pandemic wiped out. As ludicrous as the need to have permanent cybersecurity help that Palo Alto Networks (PANW) was developing.
Now Abbott's on the cusp of a truly blowout quarter because of its at-home Binax. Palo Alto? It's stock rallied almost 20% on an amazing quarter and even better forecast.
But perhaps most impressive is Corie Barry's Best Buy Total Tech membership program where as Barry described it, "You get unlimited Geek Squad technical support on all of the technology in their home no matter where or when you purchased it, including 24/7 to dedicated phone and chat teams." Barry continues, "You also get 24 months of product protection on most purchases as Best buy, free deliver and standard installation, exclusive member pricing, a sixty day extended return window and free shipping of on-line orders." The program has exceeded expectations and there's a real easy reason why: you have IT tech at work but nothing to speak of at home. Best Buy is replacing IT support because it helps whether you bought at Best Buy or not. When you are on that Zoom (ZM) call and things break down, who ya gonna call?
As Barry told me: "We are very excited about it and strongly believe it leverages our differentiators and our employees so genuinely believe in it." She adds that it is "a lot more fun than attaching a warranty," which I think most people dread when asked about.
Think what Barry has done here: created a membership club that will be an annuity. The people who take it are going to buy at Best Buy, not at Amazon. The one time showcase for Amazon - how we always knew these guys - has turned the tables on the Seattle giant and it is working. This stock is not done going higher.
Look, some companies have always had the jump on Amazon. Take Costco (COST) which offers what I call "extreme value", meaning the best price per given quantity and quality of an item. I have examined the company's markup and I would say it's about 12% while Amazon is priced closer to traditional retail mark-ups. Costco pre-selects great items for you, at times getting them for as little money as we have our delicious Lesser Evil popcorn to them for a Christmas promotion. Have you noticed that the people you see working at Costcos are always the same? There is the least turnover of any retailer and not just because it offers the best pay and benefits. The people who work there love it. That means you get the best, highest quality service in retail. Oh, and let's not forget a private label that is almost superior to the branded and, what can I say, a sort of whimsical sense of humor replete with free samples to back it up.
But until this quarter I always feared that any of these companies could, at some point or another, be run into the ground by a more effective Amazon. Instead I see the colossus messing around with brick and mortar no doubt just to learn what the great brick and mortar stores already know. If they really need brick and mortar drop-offs they should just buy Kohl's (KSS) -- they have an existing return drop-off relationship.
The truth is, though, the days when Amazon is Death Star are over. The retailers remaining have their force field and their shields and they are beaming Amazon's projectiles right back at the once impossible to stop retailer.